- The average house price in Neath has increased by 241.2%
to £151,600 in the last 20 years, a profit of £107,170
- That means, when
adjusted for inflation in those two decades, Neath house prices have risen in
real terms by 169.1%
- What does this mean for existing Neath homeowners and
first-time buyers trying to get on the Neath property ladder?
Since 2001, UK average house prices have risen by
an astonishing 187.2% across the UK, while in London the figure is 247.6%.
Looking back at the people that bought in those
first few years of the new Millennium, few of those buying or selling property in
2001 could have forecast the massive financial impact that their decision then
would have on the rest of their lives.
In those years, there have been winners and losers,
where some Neath buyers have made hundreds of
thousands of pounds and Neath renters have paid out tens of thousands of pounds
and yet been unable to buy their first home – but life is often not as simple
as that, so in this article I wanted to discuss the matter further.
The average house price in Neath
has increased by 241.2% to £151,600 in the last 20 years, a profit of £107,170.
Now of course these
are average prices and don’t take inflation into consideration.
Yet even when adjusted for inflation, Neath house prices have still
risen by 169.1% in the last 20 years.
Characteristically,
the longer a homeowner has owned their Neath property, the larger the gain when
they sell. Yet most of these profits are never seen by Neath homeowners. It has never been money in the bank unless you sell up and downsize or move somewhere
cheaper. Instead, these
gains are re-invested back into the housing market when they buy their next
home.
So, whether the gains are banked or tied up in their bricks
and mortar, it looks like all the Neath homeowners are in the driving
seat.
What about all the Neath first-time buyers, priced out of
the market and unable to get on to the property ladder?
Are the young of Neath losing out again?
Reading the newspapers you would think so, yet nothing could
be further from the truth. In fact…
It’s 37.8% cheaper today to buy a house in Neath compared to 2007
That
isn’t a typo!
In
2002, 20% of a first-time buyer’s household income went on the mortgage
payments. Today, that figure stands at 26.2%, yet in 2007, it was 42.2% …
hence why it’s cheaper today!
Of
course, for most young Neath potential first-time buyers, the other largest
barrier to home ownership is the matter of raising an adequate deposit.
Rising
rents (and future energy prices) won’t help and will in fact make this problem
worse, giving ambitious Neath first-time buyers not much left at the end of the
month to save a deposit for their first home.
With soaring
Neath house prices, this means the amount Neath renters need to save for their
deposit is growing year on year.
For
these annoyed renters, there is the unpleasant irony that if they could only
get on the Neath housing ladder, they would find themselves better off. They
would spend a lower proportion of their monthly take home pay on keeping a roof
over their heads.
Some
people in the press have suggested the older generation, with all the equity
tied up in their homes over the last 20 years, should release some of the money
and give it to their children or grandchildren to help them on the ladder maybe?
Reports in the press have also described many homeowners in their 60’s (and
older) changing their plans to move home. Many were planning to downsize to release the tied-up equity in their home. That equity
would either be used to invest in the bank to produce an income for them and/or
to help their children (sometimes even grandchildren) on to the property ladder.
Yet with the interest paid by banks and building societies on any lump sum being very low, to many mature homeowners, it hardly seems worthwhile making the move to downsize. This means many younger would-be first-time buyers are missing out on help from the Bank of Mum and Dad (or the Bank of Grandad and Grandma) with their deposit.
However, the problems caused by low-interest rates could also be their saviour.
Many older homeowners have turned to Equity Release, thus allowing them
to get hold of a share of the equity amassed in their property, in exchange for
a tax-free lump sum of cash.
Cash that could be used to help with deposits for their children/grandchildren?
The mature homeowner then stays in their larger family home and helps
their family buy a property.
Whilst I am not a mortgage adviser (and you must take proper advice from
a qualified mortgage broker), equity release mortgages don’t have end dates and
the interest payments are rolled up (until you pass away). This means that
there aren’t any monthly payments.
The interest rate you pay is normally fixed for the mortgage and because
interest rates are so low, that means the debt shouldn’t balloon up. And should
you decide to sell in a few years’ time, you just pay back the capital,
redemption fee and the small amount of interest accrued.
Now of course, that does mean there will be less for your offspring to inherit when you pass away.
Equity release mortgages though have had some bad press recently. In the
past they were unregulated and pricey. Yet today, there is more
protection for borrowers.
One answer
to the growing interest debt is to pay part or all of the monthly mortgage interest
charged, yet you must have the income for that.
You
also need to take advice on how the equity release will affect your liability
for nursing home fees and inheritance tax. Also, if only one person in your
home is the owner of the property, if that homeowner dies, the partner who is
not on the mortgage (because only owners can go on a mortgage) won’t have any rights
to stay in the family home.
Finally,
if you are planning to move, don’t just compare the interest rate, but the
redemption charge for early repayment – some of them can be very high.
My
advice – take professional advice and speak to your family and involve them.
Yes, we have all built up some amazing equity in our Neath homes, and yes,
there is potential to help the younger generations with that wealth. Just go in
with eyes open and know all the facts, all the pros and all the cons – then
decide what is best for you with all that information to hand.
What are your thoughts, as a mature Neath homeowner or a first-time buyer, on this? It would be good to hear from you.
